2 min read
Back on track?
Year two of the pandemic has begun. Alongside the spiralling human costs of the corona crisis, its impact on the global economy has been unprecedented in terms of its speed and severity. However, there now appears to be light at the end of the proverbial tunnel – prompting the question: Is the global economy finally getting back on track?
In the latest Quarterly Market Review for Q2 2021, EFG’s economists turn the spotlight on the US and other markets to see if the longed-for recovery is emerging.
Is the US economy finally getting back on its feet after the Covid hit of 2020? With a combination of substantial fiscal expansion, easy monetary policy and the rapid rollout of Covid vaccination programmes, the stage seems to be set for a rebound in 2021. In fact, the US Fed is predicting GDP growth of 6.5% this year, and some private sector forecasts are even more upbeat. EFG economists believe that the US economy could actually exceed pre-crisis levels in the second quarter of 2021, experiencing what they describe as ‘China-like’ growth. Meanwhile, the economies of Japan, the UK and the eurozone are broadly expected to return to pre-crisis output levels by late 2021.
The outlook for the US may not be entirely rosy, however – with some observers warning of potential bumps along the way. In particular, there are fears in financial markets that the US Fed’s decision to ‘go big’ with its fiscal stimulus measures to ensure a full recovery now also raises the spectre of inflation other possible side effects, such as a dearth of capital for private sector investment. So how valid are these concerns – and is the recent rise in the yield of US 10-year government bonds a further sign that we should be worried?
This is just one of the topics discussed in the latest Quarterly Market Review for Q2 2021. To discover more about how economies are faring in individual markets or regions – from Switzerland and the UK to Asia and Latin America – or to delve into a special focus article on digital currencies, you can access the full Quarterly Market Review here.